The Dollar vs. Other Currencies And Gold

Investment advisor Jayant Bhandari, in this conversation with Maurice Jackson of Proven and Probable, discusses recent moves in the U.S. dollar, the role of gold, and several arbitrage opportunities he sees.

Maurice Jackson: Welcome to Proven and Probable. I’m your host, Maurice Jackson. Joining us is Jayant Bhandari, the host of the highly acclaimed Capitalism & Morality seminar, and a prominent, sought-after advisor to institutional investors. Today we will discuss geopolitical events between the United States and third world nations.

Jayant, we’ve talking with you today so that you can share your insights on developments occurring with peripheral markets, specifically in third world nations. You and I were talking offline and you referenced a sequence of events that you see occurring with third world currencies rapidly depreciating. What currencies are being impacted, and why?

Jayant Bhandari: Maurice, it would be much nicer to ask which currencies are not being impacted. The reality is that just about every currency is getting depreciated, compared to the U.S. dollar right now. That is something that you can see across the third world countries. The Turkish lira has fallen drastically over the last few weeks. The Brazilian and Indian currencies keep falling. The Russian ruble keeps falling. In fact, you can randomly look at any of the third world countries, and the currencies are starting to fall. The people living in these countries want to buy U.S. dollars. American funds are taking their money out of these countries, and they are finding America a better place to invest.

But, not just the third world countries, even the developed country currencies are affected. For example, the euro has fallen in the last weeks. The depreciation of currencies outside the U.S. is actually quite an issue right now. This will result into a significant pain increasing in particularly the third world countries. These countries will implode politically and they will suffer hugely in terms of their economies.

Maurice Jackson: Now, are these short-term impacts caused by the Federal Reserve?

Jayant Bhandari: These are not impacts caused by the Federal Reserve. We have to look at things in proper perspective. The third world countries were getting a free ride. They have been getting a free ride for decades. The only exception I see there is China. But, the third world countries have been beneficiary of the free gift of European and American technology for the last 50 to 100 years, or 300 years. Also, the easy money policies of the European banks meant that a lot of easy money flowed into the third world countries in expectation of better yields.

Both of those things are now reversing. The easy fruit from the free gift of Western technology has now been plucked. The easy money policy of at least the American Fed for the moment has ended. Which means that the third world countries that taught that they were very smart people and that they were developing because they were something very special, is turning out to be completely false. They were mainly the beneficiary of the gift that the U.S. was giving to them. Also, the world has been a very stable place because of America. Countries like Canada and Germany, for example, are beneficiary of the military might of the US. But, then America does not even get thanked for the benefits it provides to so many of these countries.

Maurice Jackson: You reference the United States, and we also just discussed the Fed. Let’s now inject here that the Fed is increasing rates, if it goes with its plan to do so, and/or tariffs. How do they fit into this narrative?

Jayant Bhandari: I am a person who likes free trade. I’m a libertarian, and I think people should have full freedom to buy, exchange and trade with whomever they want to conduct their transactions. However, the trade can result into certain problems. So, free trade is always good for a society. But, it might not benefit everyone in the society equally. What happens, for example, is that when a rich country trades with a poor country, both the countries benefit from free trade. But, what happens with the underclass of the rich country is they might actually suffer while it is the rich people who benefit the most.

Now, I have nothing against it. But, the problem is that mostly today, the choices these rich countries have is that either reduce the suffering of the poor people, or provide social welfare, social security. So, if Trump has the choice between increasing tariffs or that the underclass in America gets more jobs or to continue to provide more social welfare, maybe the first choice, which is to restrict some trade to enable job creation among the underclass in the U.S., is a better choice.

Maurice Jackson: So, then in your view because I hear this a lot, that the U.S. is acting like a bully. So, in your view, is it justified in its actions?

Jayant Bhandari: Maurice, in the real world, nothing is perfect. We choose between a bad and a worse. Most people in the world would move to the U.S. tomorrow morning if they could. Just about everyone I meet in India or any of these third world countries, including in Africa or the Middle East, would tomorrow morning move to the U.S. if they could. America is a great place. America is a bully, of course, it is a bully. Imagine what Iran would have done or Russia would have done if it had a similar kind of military might that America has.

America is a bully. America has to look after maintaining its stability around the world. That does not mean that I like the military industrial complex that has developed in the U.S., which actually creates a lot of problems. Americans are the people who really believe in fairness. American people rise up against the governments when America starts to do too much wrong.

Maurice Jackson: Are you surprised that investors are moving to the U.S. currency, the dollar, rather than the ultimate currency, gold?

Jayant Bhandari: No, I’m not surprised at all. The people in the third world consider the U.S. dollar to be gold. So, they quite rightly want to move their currencies, convert their wealth into American dollars. I know people who actually keep American dollars with them, and they convert everything they own in these third world countries into American dollars. The American dollar is among the most stable currencies in the world. Now, that does not mean, Maurice, that the U.S. Fed does not depreciate and continue to depreciate American dollar. But, again, we are choosing between a bad choice and a worse choice. In the real world, we only have these two choices.

Now, coming to gold. Gold is a very important insurance that people have. I think people should be paying more attention to the gold price. The reason is that America is doing well for now, and in my view America will continue to do well under Trump. But, Trump is not going to be there forever. America will start to change again. America will become more leftist once Trump is gone. By that time, you should be thinking of converting your U.S. dollars into gold. When we invest, we should be investing for the long term. That is where gold becomes extremely important.

Maurice Jackson: Switching gears onto issuers, do you have any names and/or arbitrage opportunities that have your attention at the moment?

Jayant Bhandari: One company, Maurice, which you follow and I follow is Irving Resources. The ticker is IRV. I’m actually keeping a very close eye on that company. I’m expecting that it might get its permit sometime this year. So, that’s one good company. There are two arbitrage opportunities that I want to mention here. Both are very easy in terms of understanding mathematically. One company is Kangaroo Resources Ltd. (KRL:ASX). The ticker is KRL on the Australian Stock Exchange. This company is being acquired for $0.15 in cash. It is today trading at $0.12, which means that there is a clean 25% arbitrage upside in owning Kangaroo Resources. The other company that I want to mention is Nkwe Platinum Ltd. (NKP:ASX). The ticker is NKP. NKP also trades on the Australian Stock Exchange, and this company is being acquired by Zijin Mining. It is currently trading at $0.09 Australian, and shareholders will get $0.10 Australian in cash after the modular is closed. Which means that the current upside is about 11%.

Maurice Jackson: Jayant, as always, thank you for sharing those opportunities with us. Finally, what can you share with us about the Capitalism & Morality seminar, for reason, argumentation and liberty? Are last month’s presentations uploaded?

Jayant Bhandari: Those presentations are yet to be uploaded. But, the next seminar will be held on August 3, 2019. We have still to start working on it. But Doug Casey, Rick Rule and Ian Plimer have already confirmed that they will be speaking at the next year’s conference.

Maurice Jackson: Last question. What did I forget to ask?

Jayant Bhandari: Two things, Maurice. Do the best in the bear market. People worry too much about the bear market. In my view, the bear market is actually the best time to make money. Also, people are very worried about the trade war between the U.S. and China. I think this is creating into unwinding of a lot of speculative investments that people had made. But, eventually, all this trade war will end up looking like noise in a few months’ time. People should assume that this will go away, and if they don’t get too fearful about the possibility of this trade war continuing, they might actually be in a position to position themselves to profit from the fear that the trade war has brought to the market. This trade war, in my view, is only going to end up as noise, nothing else.

Maurice Jackson: Ladies and gentleman, this is coming from one of the most respected names in the natural resource space. Thank you for sharing your wisdom, Jayant. If someone wants to get more information about your work, please share the contact details.